Halving of China’s electricity demand confirms major slowdown underway

Economic growth


China elec Jan15

China’s reported  7.4% GDP growth for 2014 was the lowest in 25 years.  But even so, it probably still overstates the true economic position.  How could China  possibly produce a final fiigure for GDP within just 20 days of 2015?

Electricity consumption, as Premier Li has advised in the past, is a far more reliable guide to the actual state of the economy. The chart shows how this has grown since 2008:

  • Demand was 3.4bn kWh in 2008 (blue column), and grew 6% (red line) to 3.6bn kWh in 2009
  • China’s massive stimulus programme in 2009 then caused it to jump 15% in 2010
  • Growth remained at a high level in 2011, at 12%, but then began to slow
  • It grew 6% in 2012 and 8% in 2013 as the transition to President Xi’s leadership began
  • Newly-published data shows 2014 growth halved to just 3.8%, a clear sign that the economy was slowing sharply

The key to the slowdown is the vast demographic change now underway in China, due to the collapse in fertility rates over the past 40 years.  As Yi Gang, deputy governor of China’s central bank has noted:

China’s demographic situation and labor supply have fundamentally changed. The ageing problem will intensify and its impossible for China to sustain double-digit growth rate.”

One key issue is that the working population is now in decline.  The number of people aged between 16 – 59 fell by 2.44m in 2013.  Within 10 years, the total population will start to fall.  The reason is that fertility rates collapsed from 6.1 children/woman in 1950 to just 1.1 child/woman in recent years.

This is nearly half the 2.1 replacement level necessary to keep the population stable over the long-term.

This fundamental issue has been disguised in recent years, as the total population was continuing to increase.  But this was due to life expectancy having risen by 50% to 75 years over the same period.

In the short-term, of course, this lack of babies helped to increase economic growth rates, as it meant more women joined the workforce.  But now China’s earlier demographic dividend is becoming a demographic deficit:

  • Most parents have just 1 child, so there are relatively few children under the age of 25
  • The rise in life expectancy is now delivering a vast cohort of people aged over 55 years

So China’s economy is now entering a new paradigm.  It has fewer young people, but increasing numbers of older people.  All those babies born before 1975 are now living a decade or more longer than their parents.  And their incomes are very low, with average urban pensions just $330/month – and rural pensions even lower.

This creates many dangers for the global economy.  Most policymakers are only just starting to recognise the far-reaching economic impact of today’s changing demographic profiles.  But it also creates major new opportunities for those companies prepared to redesign their business models.


The great 'Deflation Shock' is coming closer


  The world is about to be hit by a demand shock equivalent to 1973’s...

Learn more

Oil market faces "historic shift" - International Energy Agency


The above chart highlights one major reason behind my forecast last August that...

Learn more
More posts
The Fed’s stock market bubble is at risk as China bursts its real estate bubble

The US stock market bubble just keeps rising. And every investor “knows” that the US Fed...

EU patience starts to run out as UK threatens to break the N Ireland Protocol

Unsurprisingly, it turns out that Brexit still isn’t “oven-ready”, despite the UK ...

An end to the China bubble would risk a Minsky moment

My letter in today’s Financial Times warning of the risk to Western financial markets from the bur...

Xi aims to “bring order out of chaos” by bursting China’s property bubble

China is at the start of its biggest economic shake-up since 1978, when Deng Xiaoping launched his p...

Housing markets face long-term downturn as central banks abandon stimulus

Last month saw the beginning of the end for the central banks’ 20-year experiment with stimulu...

Businesses set for transformation as supply chain chaos combines with Net Zero targets

‘Business as usual’ seems a most unlikely outcome as we look forward over the next 6 months....

Auto industry provides a model for the transition to Net Zero

Flooding in China and Europe, record temperatures in the USA, wild fires – all these are signs...

Europe’s Green Deal will transform its economy, as floods confirm urgency of tackling climate change

The floods raging in Germany and Benelux highlight the scale of the Climate Change challenge ahead....


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more